Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Scotiabank analyst Mario Saric reviewed the quarter for the REIT sector and listed his top picks in the sector,
“CAD REITs reported avg. Q1 year-over-year FFOPU [funds from operations per unit] and SSNOI [same store net operating income] growth of 0.5 per cent and 6 per cent, with FFOPU 0.6-0.7 per cent below both Scotia and consensus, driving avg. 2023 consensus AFFOPU [adjusted funds from operations] down 1.1 per cent, mostly in Office, Diversified, and Seniors … CAD REITs are now lagging the TSX by 2 per cent year-to-date (were up 2 per cent post Q4 results). We still think soft landing = stable NOI growth = reasonable debt availability = less pronounced cap rate expansion = buy REITs today vs. harder-landing = 10-per-cent-plus total return downside (i.e., 50bp+ higher cap rate). Our Top Growth Picks = CAR, DIR, GRT, IIP, SVI. Our Top Value Picks = AP, BN, CSH, HOM, MHC, REI, TCN. Our Top Income Picks = CHP, CRR, CRT.”
BMO chief economist Doug Porter reports that the domestic job market, while still strong, is slowing,
“Make no mistake, the Canadian labour market is still historically strong. There have only been two months in the past 50 years that the jobless rate has been lower than the recent run of 5.0-per-cent readings. New job creation has been torrid in the past six months. Wage growth is solid, running at above 5 per cent by some measures.
“Having dispensed with the formalities, there are signs that conditions are cooling. Notably, the previously sky-high level of vacant jobs is coming back down to Earth. The vacancy rate fell two ticks to 4.5 per cent in March. That’s well down from last spring’s record 5.7 per cent, and the lowest since May 2021. True, it’s still well above the pre-pandemic norms of around 3 per cent, but seemingly cool enough to be blunting wage gains. For example, the payroll survey finds that the fixed-weight measure of earnings (which corrects for shifts among sectors) has cooled notably since last summer’s highs. These trends are the BoC’s friends.”
“BMO: Strong jobs market begins to slow” – (research excerpt) Twitter
BofA Securities investment strategist Michael Hartnett’s weekly Flow Show report uses three quotes from professional managers to highlight what he sees as the current “zeitgeist” for professional money managers,
“Zeitgeist I: ‘I mean, if you’re going to lose your job and be replaced by AI in the next few years, might as well own some AI as a hedge, no?’ Zeitgeist II: ‘Bubbles not easy, put plenty of investors out of business. But this one you getting paid by fat yields in cash & bonds to ignore for now. Why no FOMO yet.’ Zeitgeist III: ‘4-per-cent real yields popped internet bubble, 3-per-cent popped subprime, crypto crashed on real yield rip from -100bps to 150bps. But market telling you real rates may need to rise another 100-150 bps from here to pop ‘baby bubble’ in AI.’”
The second quote interested me most, indicating that higher bond yields are keeping money managers from chasing rallies so far.
“The PM zeitgeist according to BofA’s Hartnett” – (research excerpt) Twitter
Diversion: “Neuralink says it has the FDA’s OK to start clinical trials” – Ars Technica
Tweet of the Day: